Coinschedule was fined $200K by the SEC for promoting sponsored, positive ICO ratings

  • The US Securities and Exchange Commission has struck an agreement with Coinschedule.com, a defunct ICO review website, for violating anti-touting sections of federal securities laws
  • The SEC notes that Coinschedule continued to publish ICO ratings after the SEC’s 2017 DAO Report, which warned that initial coin offerings (ICOs) might be securities and that those who promote them must follow federal securities laws
  • According to the commissioners, the omission reflects our unwillingness to provide further guidance on how to determine whether a token is being sold as part of a securities offering or whether tokens constitute securities

The US Securities and Exchange Commission has reached a settlement with Coinschedule.com, a defunct ICO review website, for breaching federal securities laws’ anti-touting provisions. In response, two SEC commissioners sent an open letter claiming that the settlement exposes weaknesses in the commission’s operations. Coinschedule failed to declare it was getting payments from digital asset issuers for good ratings, according to a securities regulator announcement dated July 14. Blotics, formerly known as Coinschedule, shall pay a penalty of $154,434 plus $43,000 in disgorgement plus interest under the terms of the settlement, without admitting or rejecting the SEC’s allegations.

Between 2016 and 2019, the website was active, with many of its visitors originating from the United States. According to the SEC, the site issued trust ratings for over 2,500 ICOs, claiming to use a proprietary algorithm to analyze each other’s credibility and operational risk. In actuality, the token issuers paid Coinschedule to feature their token offers on Coinschedule.com, which Coinschedule failed to tell visitors about. 

The SEC highlights that Coinschedule continued to publish ICO evaluations after the publication of the SEC’s 2017 DAO Report, which cautioned that ICOs might be securities and that individuals who promote them must follow federal securities laws. Taking money for positive publicity of securities was illegal, according to Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit that the securities legislation banning promoting stocks for pay without adequate disclosures to investors is plain and longstanding.

However, not everyone at the SEC is pleased with the case’s outcome, with SEC commissioners Hester Peirce and Elad Roisman writing a letter condemning the commission for failing to clarify which of Coinschedule’s digital assets were truly securities in a letter. 

The omission is symptomatic of our unwillingness to give more advice on how to evaluate whether a token is being sold as part of a securities offering or which tokens are securities, according to the commissioners. As shown by the requests for clarification that each of us gets and the constant outreach to the Commission staff for no-action and other remedies, there is a definite lack of clarity for market participants surrounding the applicability of the securities rules to digital assets and their trading.

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